July 17, 2006
Since the 1950s, Japan has been an important source of foreign direct investment (FDI) and imported technology in Taiwan. However, the investment model and industries have undergone a number of changes along with the transformation of Taiwan's economic and trade environment. In recent years, Japanese companies have taken note of Taiwan's mature, diverse consumer markets, and have reoriented their investment model towards mass consumers through the service industry, high-tech products and
R&D, and technical innovation. The Department of Investment Services (
DOIS) notes that Taiwan society is currently working hard to develop a knowledge-based economy, raise the quality of life, respond to an aging population, and to focus on environmental protection and energy development. For Japanese companies, these development qualities offer future investment opportunities in Taiwan for Japanese companies.
According to statistics on Japanese FDI from the
MOEA Investment Commission, from May 1952 to May 2006, there were a total of 4,970 investment cases, 26.6% of a total 18,687 cases. For this period of time, Japan occupies the number 1 spot for the number of investment cases. Japan has invested a total
USD 13.004 billion, or 18.22% of the aggregate amount of
USD 71.366 billion – second only to the US.
According to
DOIS analyses, there have been three waves of Japanese investment in Taiwan. The first wave of Japanese investment occurred between 1966-1977, in which Japan used Taiwan primarily as an export and processing base; a second wave, which occurred from 1986 to 1992, concentrated on electronics and electrical appliances; the third wave started in 1996 and continues to the present, and has focused on computers/semiconductors, LCD displays, among other high-tech industries. In recent years, Japanese companies have started navigate Taiwan's diverse market, using Taiwan as a testing ground to expand into the greater Chinese economy. In addition, these companies have started to pour large-scale investment into value-added services, engaging in technical innovation, design
R&D, and market testing for new products.
The
DOIS notes that Japanese companies in the current investment wave are focusing on the high-tech and service innovation industries for the following reasons:
I. Taiwan and Japanese companies compliment each other in industry development
Japan and Taiwan both possess standard and vertical divisions of labor, and the two share a close, cooperative relationship. One example is found in the image display industry -- Japanese technology was integrated with Taiwan's highly efficient, low-cost rapid response abilities, creating an industry edge that blossomed into a highly successful flat-panel display industry for both Taiwan and Japan. Moreover, Japanese investment has helped Taiwan's image display industry become more complete in its supply structure, covering up, mid and downstream suppliers: industrial clusters for flat-panel displays have emerged at the Hsinchu Science Park (e.g, Hoya), the Central Taiwan Science Park and the Yunlin Technology Industrial Park (e.g, Asahi Glass, Nitto Denko, JSR) and the Southern Taiwan Science Park and the Tainan Technology Industrial Park (eg. Sumitomo Chemical, Stanley, Chisso, Toppan Printing). The formation of these industrial clusters has encouraged companies to continue and expand their investment.
II. Taiwan is a suitable test market for the Asia-Pacific region for Japanese companies, as well as a center for design
R&D and procurement in East Asia.
Taiwan serves as an effective reference for entering the Chinese market. Taiwan holds Japanese products and culture in high regard, due to close historical and cultural ties. And as Taiwan is considered part of the greater Chinese market, Japanese companies regard Taiwan as a suitable ground for product testing, and study Taiwan consumer preferences before making any adjustments to their products and sales strategies.
In summing up the different stages of Japanese investment in Taiwan, observers will find that Japanese companies in Taiwan have already shifted from labor-intensive to capital-intensive industries. In recent years, Japan has invested more in the technology and knowledge-intensive industries, and has engaged in more corporate development through technology upgrades and
R&D services and innovation.
The
DOIS calls on Japanese companies to look into the new trends of Taiwan's market development and to actively invest in Taiwan. The department also calls on Taiwan and Japanese companies to cooperate and work together further to produce more new technologies and products; a successful experience in this regard will help both parties expand into the greater Chinese and southeast Asian markets. The
DOIS also plans to commission the Nomura Research Institute to establish a "Japanese Service Window" in order to facilitate Taiwan-Japan cooperation.
The
DOIS will continue to maintain contacts with Japanese industries that hold internationally competitive and compelling technologies such as industrial robotics (e.g., Fanuc). Domestically, the
DOIS is promoting strategic industries such as green energy (e.g. Sharp, Kyocera, Mitsubishi), auto electronic components (e.g. Denso), and is closing the gap among domestic suppliers by engaging in strategic partnerships with Japanese companies in the semiconductor and display imaging industries, as well as equipment manufacturing companies such as Canon, Nikon. In the field of non-manufacturing industries, the
DOIS will also promote Japanese investment in cultural creative services, telecommunications and media, tourism, and exercise and leisure services, and environmental protection. Furthermore, the
DOIS will focus more on understanding Japanese companies' views of administrative systems among government agencies Taiwan, and to set up interaction between these administrative systems and the decision-making level of Japanese companies. And when assistance is required, the
DOIS will offer the appropriate concern and courteous treatment – this will help with Japanese investment in Taiwan. Therefore, strengthening interaction with the management levels of Japanese companies is necessary.
Most all of the Japanese companies currently investing in Taiwan hold a high opinion of Taiwan's investment environment. The
DOIS will continue to uphold this opinion by further strengthening contacts with Japanese companies in Taiwan, including home appliance manufacturer Panasonic, semiconductor manufacturer Elipda, the FPD Toppan Printing, automotive company Toyota, financial services company Mizuho (Mizuho Corporate Bank), construction company Kajima Corporation, retail distributor Shin Kong Mitsukoshi, chemicals company Nitto Denko, business conglomerate Mitsubishi Corp, heavy equipment manufacturer Mitsubishi Heavy Industries, and equipment manufacturer ULVAC. By providing more complete services, the
DOIS will establish a communications platform and help solve issues related to operating in Taiwan and, as well as increasing future investment in Taiwan.
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